Appraisal Quest Co. (805) 469-3088 can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. Since the liability for the lender is generally only the difference between the home value and the amount due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value variationsin the event a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan guards the lender in case a borrower doesn't pay on the loan and the worth of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's lucrative for the lender because they collect the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Keen home owners can get off the hook ahead of time. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
Since it can take many years to get to the point where the principal is just 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends forecast falling home values, you should understand that real estate is local.
The difficult thing for almost all home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At Appraisal Quest Co. (805) 469-3088, we're experts at pinpointing value trends in Camarillo, Ventura County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually remove the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: